N11707
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

OS NO 98 OF 2008 (CC1)

BETWEEN
GEORGE KAKAS & 63 OTHERS
Plaintiffs

AND
NATIONAL HOUSING CORPORATION 
First Defendant

AND
MATHEW MINAPE 
Second Defendant

AND
MONEY TALKS LIMITED 
Third Defendant

WAIGANI: MAKAIL J
19 JULY, 29 AUGUST 2024; 20 FEBRUARY 2026

PROPERTY LAW – STATE LEASES – Fraud alleged against registered proprietor – Property occupied by long-time tenants– Public housing purpose – Prior notice of sale of property – Notice of offer to purchase property given to tenants – Proof of – Land Registration Act – Section 33(1) – National Housing Corporation Act, 1990 – Sections 37 & 38 

PROPERTY LAW – Landlord and Tenant – Tenancy Agreement – Termination of – No prior notice given by landlord – Remedy of – Damages would not be an adequate remedy 

Facts

The plaintiffs are long-time tenants of the first defendant.  They reside on a residential lease for public housing at Gordons in the National Capital District (“Property”).  The first defendant sold the property to the second defendant and to the third defendant. The plaintiffs alleged that the defendants had procured the title of the property by fraud.  Secondly, that as long-time tenants of the property, the first defendant should have given prior notice to them, of the sale of property to the second defendant and then to the third defendant.

Held:

1.	On a plain reading of Section 38 of the National Housing Corporation Act 1990 it is necessary for the first defendant to give notice to the plaintiffs as sitting tenants, the option to purchase the property.

2.	 A title of a State Lease may be set aside where among others, if the first defendant failed to comply with Section 38 of the National Housing Corporation Act 1990 where it did not give notice to the plaintiffs the option to purchase the property.

3.	In addition, a failure by the first defendant to comply with Section 38 of the National Housing Corporation Act 1990 by not giving notice to the plaintiffs of the option to purchase the property constitutes a breach of Section 59 of the Constitution.  As sitting tenants, the principles of natural justice called for the first defendant to notify the plaintiffs of its intention to sell the property and to give the plaintiffs the opportunity to take up alternative accommodation within a reasonable period of time.  

4.	Fraud may be inferred from, among others, breach of Section 37 and Section 38 of the National Housing Corporation Act 1990.  Accordingly, the title of the third defendant to the property was quashed on grounds of fraud pursuant to Section 33(1)(a) of the Land Registration Act.

Cases cited

Mudge v Secrtary for Lands [1985] PNGLR 387 
Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215
Naomi Vickey John v James Nomenda, & National Housing Corporation (2009) N3851

Counsel

Mr D Dotaona, for plaintiffs
No appearance, for first defendant
Mr A Manase & Mr I Ophahi, for second & third defendants

JUDGMENT

1.	MAKAIL J:  The plaintiffs alleged that they are long-time tenants of a public housing residence on a State Lease for residential purpose described as Allotment 30 Section 97, Hohola (Gordons) in the National Capital District.  The public housing residence is commonly referred to as the “Gordons Flats” but in this judgment will be referred to as the property. 

2.	They bring an action for fraud against the defendants.  They alleged that the third defendant procured the title of the property by fraud.  They seek an order to set aside the third defendant’s title pursuant to Section 33 of the Land Registration Act including general damages and exemplary damages. 

3.	The second and third defendants deny the allegation hy countering that the property was sold to them in good faith and on commercial grounds.  

Findings of Fact

4.	I have read the affidavits of the parties, and I note that this case has a long history, but it is not necessary to retell it except to make appropriate findings of fact in relation to how the title of the property exchanged hands between the first defendant and the third defendant.  I find these to be the base facts; the plaintiffs are long-time occupants of the property.  There are total of 64 flats and not a single standalone house.  

5.	The property was sold by the first defendant to the second defendant on 10th October 2007 at a selling price of K623,915.00 pursuant to a Board resolution which approved the sale of the property.

6.	While the second and third defendants claimed that some of the plaintiffs are not sitting tenants because they did not produce their Tenancy Agreements, the second and third defendants’ claim must fail because they failed to obtain records from the first defendant to show which of the plaintiffs are not sitting tenants.

Proof of Fraud

7.	Fraud may be actual where the registered proprietor was engaged on conduct which is deceitful and misleading when representing to the Registrar of Titles to register a transfer of title of a State Lease to him or her.  On the other hand, fraud may also be proved by drawing inferences from the particular circumstances of a given case where there are irregularities or breaches in the process of sale and purchase and registration of title of the property in the Register of State Lease by the Registrar of Titles: Mudge v Secretary for Lands [1985] PNGLR 387 and Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215.

8.	In the present case, there is no direct evidence from the plaintiff that the second and third defendants misrepresented to the Registrar of Titles that the second and third defendants conspired with the first defendant to defraud the plaintiffs of the property when they agreed to purchase the property from the first defendant.  On the other hand, the process of sale of property owned by the first defendant to the second and third defendant under Section 37 and Section 38 of National Housing Corporation Act 1990 (“NHC Act”) has been challenged by the plaintiffs on the ground it is mandatory to confer good title to the second and third defendants but has been breached, thus conferring no good title to them.

9.	Section 37 provides for the first defendant to sell a dwelling to an eligible person, or approved applicant, or a person who exercises the option to him to purchase it under Section 38.  Section 38 refers to a tenancy agreement that has been in force for two years between the first defendant and tenant, or the spouse, widow, or widower of the tenant, or tenant and his spouse as joint tenant or the tenant and his next of kin and for the first defendant to offer the dwelling to be purchased by either of these persons.

10.	It is a simple and straight forward process which recognises the basic human rights of an individual to “shelter”.  Thus, contrary to the second and third defendants’ submission at paragraph 4(ii) and page 3 of their written submissions that “……it is not mandatory to advertise the sale of the property, nor is it mandatory to notify the tenants of the said property about the sale to the Second Defendant,” on a plain reading of Section 38,  it is necessary to notify the persons to which Section 38(1) refers to (the plaintiffs) by giving them an option to purchase the dwelling prior to sale of the property to the second and third defendants.

11.	The view expressed above is reinforced by the National Court judgment in Naomi Vickey John v James Nomenda, & National Housing Corporation (2009) N3851, a case where the plaintiff was an approved applicant and offered to purchase a dwelling under the Government’s Home Giveaway Scheme.  Instead, the first defendant who was not a sitting tenant or approved applicant was sold the dwelling.  The title of the first defendant was set aside on grounds of fraud because of the breach of Section 37 and Section 38.

12.	Apart from the Naomi case, the first defendant has been guilty of being complicit to fraud in many instances in the past.  In the National Court judgment in Vaki Vailala v National Housing Corporation, Honourable Dr Fabian Pok, Department of Lands and Physical Planning & The State (2017) N6598, the first defendants transfer of title of a property to the second defendant was quashed on the grounds of fraud because the defendants failed to observe the process under Section 37 and Section 38 in the context of the plaintiff being a long term resident of the property for 21 years and the second defendant being an ‘outsider’ including a inflated purchase price when the first defendant failed to properly maintain the property over the years.  

13.	It is my further view that a failure by the first defendant to comply with Section 38 by not giving notice to the plaintiffs of the option to purchase the property constitutes a breach of Section 59 of the Constitution.  In my view, as sitting tenants, the principles of natural justice call for the first defendant to notify the plaintiffs of its intention to sell the property and to give the plaintiffs the opportunity to take up alternative accommodation within a reasonable period of time.  However, the first defendant did not.  As a result, the plaintiffs were caught by surprise when according to Mr Kakas “On Sunday the 24th February 2008, I noticed a group of surveyors surveying around the NHC property, Section 97, Lot 30”, under the instruction of the second defendant as the new title holder of the property.   

14.	In this case, the first defendant may have the Board resolution and approval to sell the property to the second and third defendants, but it failed to notify by offering to the plaintiffs the option to purchase it.  Section 1 of the NHC Act does not make a distinction between a house and flat when defining the word “dwelling”.  Thus, it is open to find that the Section 38 applies to the plaintiffs as sitting tenants of the property which comprises of 64 flats.

15.	A case of fraud being procured on the title to the property by the defendants is reinforced by the lack of a valuation report to verify the value of the property and justify the selling price of K623,915.00.  In drawing the parties’ attention to the lack of valuation report, this observation is made in the context of a public housing residence where the need for the first defendant as an arm of the State being responsible for provision of public housing to its citizens, carries a high degree of duty of care in managing public housing for the State.  A valuation report will provide information about the state of the property, value of comparable property in the real estate market, estimated market value of the property at the material time.  Where there is no valuation report to justify the purchase price and no explanation offered for the lack of it, it is open to infer that the defendants on purpose bypassed it to have the property undervalued and sold at a reduced price.

16.	The lack of a valuation report reinforcing a suspicion of fraud is further reinforced by the conflicting decision of the first defendant.  At the outset, Mr David Tambili the then Managing Director of the first defendant assured the lead plaintiff Mr Kakas and his group who led the residents of the property advocating against unjust eviction and call for meaningful dialogue between the parties, that there will be no sale of the property.  The Board decision reversed that decision and paved the way for the sale and purchase of the property and registration of the transfer of title to the second defendant and then to the third defendant. 

17.	It is obvious to me that the conduct of the defendants is suspicious.  They have ignored the significance of the Tenancy Agreement between the first defendant and plaintiffs.  I cannot imagine the plaintiffs waking up one morning only to find out that there is a new owner of the property and that the new owner wants them out.  That is why in addition to Section 37 and Section 38, the relationship between the first defendant and the plaintiffs is recognised as one of landlord and tenant because of the existence of a Tenancy Agreement between them.  Such is the significance of the relationship that each party may terminate the Tenancy Agreement upon reasonable notice based on the grounds stipulated in the Tenancy Agreement.   

18.	There is no evidence that the first defendant gave prior notice to the plaintiffs to terminate the tenancy and to sell the property to the second and third defendants.  And damages would not be an adequate remedy for such breach.  In the absence of a notice being given to the plaintiffs under the Tenancy Agreement, this is a further reason to support the inference that the defendants concealed their deal to sell the property from the plaintiffs and to defraud them of the property.

19.	It may be that there is no direct evidence to prove that the second and third defendants instigated the fraud.  Be that as it may, I cannot ignore the fact that they were parties to the agreement to sell the property to them.  What they failed to observe, overlook or ignore is that the property is fully tenant by the plaintiffs.  Thus, it is inconceivable that they signed a contract of sale to purchase the property without any knowledge of the plaintiffs’ tenancy with the first defendant.  Surely something is a miss here.  Any prudent purchaser will carry out a due diligence exercise which will include inspecting the property to determine its status including whether it is vacant or not.  If it is not vacant, notice to the occupant to vacate is necessary prior to purchase of the property.

20.	The second and third defendants’ defence that the plaintiffs had defaulted in paying their rent and was the reason for the first defendant to part ways with them is self-serving and does not advance their defence further than a belated attempt to justify the first defendant’s inaction and default in its primary obligation as the owner of the property and landlord to seek recovery of the outstanding rent from the defaulting plaintiffs/tenants, or in the extreme case, eviction.

21.	Similarly, the second and third defendants’ defence that the within proceedings is incompetent because the plaintiff failed to provide evidence of consent or authority or affidavit evidence attesting to or authorising Mr Kakas as lead plaintiff to commence the within proceedings on their behalf is self-serving and amounts to an abuse of the Court’s process.  If the second and third defendants had any issue with Mr Kakas’ leadership and authority to represent the other plaintiffs in the within proceedings, they had the opportunity and should have filed a notice of motion and sought to dismiss the within proceedings prior to the trial.  

22.	In any event, the Court’s duty to give paramount consideration to the dispensation of justice under Section 158(2) of the Constitution must override this procedural requirement.  For to accede to the second and third defendants’ defence would deny the plaintiffs a right to a fair trial and seek redress from the Court.

23.	Finally, the second and third defendants’ submission at paragraph 38 on page 14 of their written submissions that they “…….have always maintained that they had no part in the First Defendant’s initial decision to sell the property” is self-serving and must be rejected.  Such a proposition is also absurd and unmeritorious.  The Court cannot turn a blind eye to the blight of the plaintiffs who have been long-term tenants of the first defendant and have not been adequately supported by the first defendant over the years in terms of upkeep of the property and now for the second and third defendants to claim that they had nothing to do with the sale of the property to them.  In my view, the whole exercise undertaken by the defendants was to defraud the plaintiff of the property for monetary gain.	The Court will not countenance such conduct.													
Conclusion

24.	Based on the above findings, I am satisfied that the plaintiffs have proven on the balance of probabilities that the third defendant’s title to the property was procured by fraud.  
25.	In terms of what relief to grant, the plaintiffs seek an order to declare the registration of the transfer of the State Lease Section 97 Allotment 30, Hohola, National Capital District from the first defendant to the second defendant and to the third defendant as being in breach of Section 37 and Section 38 of the National Housing Corporation Act 1990 and Section 59 of the Constitution and is null and void.  I will grant the order sought but with modification to bring clarity to the final relief including the order sought to compel the Registrar of Titles to annul, cancel or revoke the registration of the transfer of the property from the first defendant to the second defendant and to the third defendant forthwith.
26.	Finally, the plaintiffs did not adduce evidence and submissions to prove general damages and exemplary damages.   Accordingly, the order sought for general damages and exemplary damages is refused.
Order

27.	The orders are:

1.	The within proceedings is upheld.

2.	The title of the third defendant to the property is quashed on grounds of fraud pursuant to Section 33(1)(a) of the Land Registration Act.

3.	An order in the nature of declaration that the registration of the transfer of the State Lease Section 97 Allotment 30, Hohola, National Capital District from the first defendant to the second defendant and to the third defendant is in breach of Section 37 and Section 38 of the National Housing Corporation Act, 1990 and Section 59 of the Constitution and is null and void.

4.	An order in the nature of mandamus to compel the Registrar of Titles to annul, cancel or revoke the registration of the transfer of the of the State Lease Section 97 Allotment 30, Hohola, National Capital District from the first defendant to the second defendant and to the third defendant and restore the title to the first defendant within 40 days of this Order.

5.	The order sought for general damages and exemplary damages is refused.

6.	The defendants shall pay the plaintiffs’ costs of and incidental to the proceedings, to be taxed if not agreed.
 
7.	Time for entry of these orders shall be abridged to the date of settlement, by the Registrar, which shall take place forthwith.

________________________________________________________________
Lawyers for plaintiffs: Dotaona Lawyers			
Lawyer for first defendant: NHC In-house counsel		
Lawyers for second & third defendants: Manase & Co Lawyers